A secured business loan is a loan where collateral is issued by the borrower as a security. In case he/she defaults payment, the lender seizes the collateral. Secured business loans are the best option for businesses that are just starting since starting one is very expensive. Older businesses have already built a trust between them and the lender and of course, they do have a longer credit history hence reducing risk.
New businesses have a short or no credit history. Lenders become a little sceptical when giving loans hence the only way to buy them over is to issue a collateral unlike for big businesses.
Advantages of a secured business loan.
- Low cost.
The main advantage of secured business loans UK is the low cost that comes with it. while unsecured loans are easier to get since the application process is shorter and is less risky for the borrower, the interest rates are very high. Secured business loans have a longer process since there is the appraisal of assets. However, the presence of collateral translates to lower risk hence lowered interest rates.
- Longer repayment period.
A borrower enjoys the flexibility of longer repayment periods. Because of the availability of the collateral, the lender tends to be more relaxed and willing to extend the loan period. Usually, secured business loans UK can even last more than 25years.This will mean very little monthly charge since your total payment will be spread more. See more.
- More money
Lenders are willing to put more money in secured business loans compared to unsecured loans because they are less risky. This is possible especially if you have good credit too. This will doubly assure the creditor that you will pay back the loan. However good credit is not as crucial here as in unsecured loans. Due to the presence of a collateral, the lender will not care much about other things.
- Easy to obtain.
Because the loan is secured on an asset it will prove easier to obtain one in case of bad credit compared to unsecured loans. Many lenders give bad credit secured loans so getting one will not be a problem. However, the interest rates might be high because of your credit history.
- Builds trust between lender and borrower.
Building trust and relationship between your business and the lender is one of the most valuable things small businesses tend to overlook. It is advisable to make sure you communicate regularly with your lender and make your payments on time. This will build the lender’s trust in you and he/she will be more than willing to lend you some more money in the future. Do not take advantage of this and disappoint him/her.
When applying for secured business loans be sure the collateral is an asset that you are ready to lose. The business might not take off as expected hence inability to pay the loan. However, this loan would be the best for your business. Do not go for another. Learn more details at https://www.aspirebusinessloans.co.uk/blog/late-payments